All Forum Posts by: Nico C.

Great stuff - appreciate all of the feedback!

Hello BP!

I have my VA Loan available and I am ready to do a Multi-Family house hack in San Diego, CA where I am stationed. Only problem is: these numbers are brutal. The best projects I can find I will barely break even (in terms of cash flow) until years 3-5. As investors we don't bank on appreciation (even though in San Diego it's pretty safe), so what are good metrics for a hot market? Am I looking at these deals the wrong way? Should I be thinking in terms of how little I will be paying out of pocket for my living expense instead of whether or not the property "cash flows"? What is the best strategy here? Put little to no money down, add value, raise rents, lower expenses, etc.? If I have no money down, and can find a way to break even each month, seems like that should be good enough, right? Sanity check requested.

Thanks,

Nico

@Chris Mason

So a professionally managed property (which I have) with the firm signing a lease, that allows for sub-letting, is a legitimate work around if we are operating less than a year?

That’s not considered fraudulent?

@John Underwood

I have not had it for two years - but I am the owner.

My lender will not consider income from my short term rentals as part of my Debt to Income Ratio. Any suggestions or workarounds? (Besides submitting a bogus lease for a “long term tenant”... yes this has been suggested... not doing it.)

@Jacob Kenneally - all of the above. Very happy with her and her team, you have chosen very well. Big shout out to my property manager Mary Kenworthy - she's fantastic.

@Nathan Killebrew

“Man’s ability to endure is only limited by his choice not to...”

-Viktor Frankl

“Good enough, isn’t”

-Alex Honold’s Mom

Great thread Nathan!

Investment Info:

Large multi-family (5+ units) buy & hold investment in Norfolk.

Purchase price: $427,000
Cash invested: $138,000

Snapshot Metrics:

1% Rule = 1.34%
Purchase Price: $427000
Estimated Rehab Costs: $140000
ARV: $610000
Present Monthly Gross: $2320 (3 Vacant Units)
Projected Monthly Gross: $5750

This is our biggest project to date. We purchased 3x Duplexes in very distressed condition , all cash at $427k, for a large scale (for us) BRRRR.

What made you interested in investing in this type of deal?

We are trying to scale! It's time to move into multi-family! We were struggling to see the value add we wanted in the SFH space. There is so much more room to add value in multifamily.

How did you find this deal and how did you negotiate it?

We found this deal on MLS and negotiated by taking advantage of its distressed condition.

How did you finance this deal?

All cash purchase! Since these are duplexes on three lots - we hope to leverage conventional financing for the most favorable terms available. We are not quite ready to refinance as renovations are on-going and we don't have the tenant base established to validate our value add. Some of our units are available now, but others still have tenants transitioning onward. Those will be the next ones we rehab.

How did you add value to the deal?

This has been a big undertaking. We replaced roofs, refinished the interiors, repaired staircases to top units in order to make them safe for usage - they were in horrible + unsafe condition upon purchase. We also replaced and elevated all HVAC units to protect them from the flood zone. We are shooting for 40% increase in rents across the board which will yield the awesome refinance value we want.

What was the outcome?

The property is still being renovated, though we have three units available now for rent. We just got our first new tenant application yesterday so we are excited for that outcome! Time to start seeing the fruits of our labor - a lot of labor. We had one cash for keys situation on this deal, one tenant disappeared with all of her appliances (but not her security deposit woohoo!), and we are presently bringing those two units up to our standard. This project is on-going so stay tuned!

Lessons learned? Challenges?

1x Eviction/Cash for Keys Situation
1x Disappearing Tenant
1x Tenant refusing to pay her rent for the final month she is with us, eviction initiated

Investment Info:

Large multi-family (5+ units) buy & hold investment in Norfolk.

Purchase price: $427,000
Cash invested: $138,000

Snapshot Metrics:

1% Rule = 1.34%
Purchase Price: $427000
Estimated Rehab Costs: $140000
ARV: $610000
Present Monthly Gross: $2320 (3 Vacant Units)
Projected Monthly Gross: $5750

This is our biggest project to date. We purchased 3x Duplexes in very distressed condition , all cash at $427k, for a large scale (for us) BRRRR. That cash flow is weak, but that's because the project is on-going and we are in the process of renovating, transitioning the wrong tenants out, and bringing the right tenants into our units. The strategy is to keep the property preforming + offsetting our expenses as long as possible by renovating units, bringing them to market, and turning over the subsequent units. We learned from our mistakes on our previous post by having the property appraised prior to the renovation which brought back a value of 512k! We remain optimistic about our post-renovation valuation. We are thrilled to be able to provide our current tenants with renovated + safe access to their units, update their interiors, address some ancient HVAC systems and bring their roofs up to standard. Once the project is complete we expect to achieve $5750 in gross monthly rent + recapture 100% of our acquisition capital + 30% of our renovation capital.

We are presently in pursuit of a good financing solution for this project, this seems like a great opportunity to apply commercial financing as we have six units on our hands (3 separate properties). Would love any feedback available!

We are so grateful to be a part of this community, thanks for reading everyone!

Here is a strange twist - updated elevation certificates will not lower my premiums per my agent. My insurance company also says the properties ARE in a flood zone, but my banks don't require flood insurance... seem odd? Appreciate all the wisdom here guys!!